Shifts in Luxury Consumer Behavior Amid Rising Prices

Luxury goods retailers are navigating a challenging landscape characterized by rising prices and shifting consumer preferences. A report by Bain & Company and the Italian luxury goods industry association Altagamma indicates that between 35% and 40% of luxury items were sold at discounted prices in 2025, primarily through outlet stores. The average operating profit margins for luxury brands have dropped to their lowest levels since 2009, ranging from 15% to 16%. Claudia D’Arpizio, global head of luxury at Bain, noted that this decline reflects consumers' rejection of inflated prices rather than a decrease in overall spending.

Luxury Consumers Turn to Outlet Stores Amid Rising PricesThe K-shaped economy is forcing luxury brands to pick a side

As luxury brands have increased prices to levels 1.5 to 1.7 times higher than pre-pandemic figures, consumers are increasingly gravitating towards newer brands that offer high fashion content at lower price points. Alex Angelchik, who relaunched the Robert Talbott brand, emphasized that younger luxury consumers are critically evaluating the price-to-value ratio. The luxury resale market is also thriving, with The RealReal reporting a 20% year-over-year increase in gross merchandise value in the third quarter of 2025, indicating a shift towards more cost-effective luxury options.

Luxury Consumers Turn to Outlet Stores Amid Rising PricesThe K-shaped economy is forcing luxury brands to pick a side

The luxury market is exhibiting a bifurcated performance, as highlighted by Burberry CEO Joshua Schulman. Brands like LVMH and Kering are focusing on disciplined pricing strategies and maintaining full-price sell-through, while Richemont reports sustained demand for its higher-priced jewelry brands. This polarization is evident in footwear, where shoes priced under $250 now represent 42% of the market share, contrasting with a significant decline in the $500-$1,000 luxury tier.

The K-shaped economy is forcing luxury brands to pick a side

The current economic environment has led to a challenging situation for traditional apparel retailers, which find themselves caught in the middle of this market polarization. Elizabeth LaFontaine, director of research at Placer.ai, noted that retailers focused on value are thriving, while those targeting higher-income consumers are also performing well, leaving traditional retailers to compete fiercely for consumer attention.

The K-shaped economy is forcing luxury brands to pick a side

Looking ahead, Jonathan Cropper, founder of Futurlogic, predicts that wealthier consumers will continue to exercise their purchasing power, while lower-income Americans may reduce spending. This creates a long-term tension for luxury brands, which must balance maintaining exclusivity with fostering inclusiveness for potential future luxury consumers. Brands are increasingly investing in experiential retail and accessible luxury concepts, such as Louis Vuitton's upcoming hotel on the Champs-Élysées and Ralph Lauren's global café operations, to attract a broader audience.

The K-shaped economy is forcing luxury brands to pick a sideLuxury Consumers Turn to Outlet Stores Amid Rising Prices

• “When consumers step back from paying full price, it is less a sign of frugality and more a clear message that the price-to-value equation in luxury has drifted out of balance,” — Claudia D’Arpizio, Global Head of Luxury, Bain & Company

Luxury Consumers Turn to Outlet Stores Amid Rising Prices

• “We are changing the way people shop, making resale a primary option,” — Rati Saha Levesque, CEO of The RealReal

Luxury Consumers Turn to Outlet Stores Amid Rising Prices

• “Affluent consumers are still spending at the top of the market, while the middle is trading down,” — Andrew Wright, CEO of Malone Soulier

The K-shaped economy is forcing luxury brands to pick a side

This evolving landscape in luxury retail underscores the need for brands to adapt to changing consumer expectations and economic realities.

Luxury Consumers Turn to Outlet Stores Amid Rising Prices